The latest CPI report showed a spike in the core measure (excluding food and energy). The core inflation rate has hit a modern record, which has prompted mutterings about monetary debasement in certain quarters of the internet. The reason why economists look at core inflation is that they want to see the underlying trend. However, stripping out food and energy is not the only way to do it. An alternative technique is to take the median change each month (or strip out the extreme changes). The Cleveland Fed calculates a median CPI series, which was also updated today. Although the monthly change did rise in the latest month, if one creates an index based on the monthly changes, the median CPI is just recovering from a plunge in 2020 (black line in the figure above).
Slicing And Dicing CPI
Slicing And Dicing CPI
Slicing And Dicing CPI
The latest CPI report showed a spike in the core measure (excluding food and energy). The core inflation rate has hit a modern record, which has prompted mutterings about monetary debasement in certain quarters of the internet. The reason why economists look at core inflation is that they want to see the underlying trend. However, stripping out food and energy is not the only way to do it. An alternative technique is to take the median change each month (or strip out the extreme changes). The Cleveland Fed calculates a median CPI series, which was also updated today. Although the monthly change did rise in the latest month, if one creates an index based on the monthly changes, the median CPI is just recovering from a plunge in 2020 (black line in the figure above).